Reporting Foreign Inheritance Received by US Persons

US citizens and residents who receive an inheritance from a foreign person must report it on Form 3520 if the total value received from a foreign estate during the year exceeds $100,000. Form 3520 is an informational return, not a tax return: the inheritance itself is not subject to US income tax, since the US does not tax inherited property as income to the recipient at the federal level. You must still report it, and the penalty for failing to file Form 3520 is 5% of the amount received for each month the form is late, up to 25%, making it one of the harsher information return penalties the IRS imposes. If the inherited property is a foreign financial account or investment, the ongoing ownership of that account or investment will create FBAR and potentially Form 8938 reporting obligations going forward. Assets inherited from a non-US person and held outside the US do not get a stepped-up cost basis under US rules in the same straightforward way as US inherited assets, and the basis rules depend on whether the decedent was a US person for estate tax purposes.